A typical 401(k) statement includes an account balance, total contributions, and a summary of investment performance.
Far less visible, however, is a clear accounting of the fees charged over the same period, leaving many investors without an easy way to determine how much those costs have reduced their savings.
That missing number could be the most expensive oversight in your retirement plan, and the math behind it is severe.
A survey of 500 respondents by automated rollover firm Capitalize found that 71% of 401(k) holders could not identify the total annual costs their plans charge.
Nearly half of those surveyed estimated that they pay less than 0.5% of total assets in fees. Only about 10% of plans across the country charge fees below 0.4%, creating a wide gap between assumption and reality, the firm found.
Many plans charge more than participants assume, and the compounding effect grows with each year those costs go unnoticed, according to Capitalize’s survey findings.
How a 1% fee difference can erase 28% of your 401(k) balance
The U.S. Department of Labor spells out the math in its published guidance on 401(k) plan fees with a straightforward example.
A worker with $25,000 saved and 35 years until retirement who earns 7% average annual returns would accumulate $227,000 under a 0.5% fee.
Raise the fee to 1.5%, and that same worker retires with only $163,000, a 28% reduction driven entirely by the higher annual cost.
No additional contributions are factored into the Department of Labor’s scenario, which means the entire $64,000 gap comes from compounding fees alone.
Dr. Steven Crane, Founder of Financial Legacy Builders, told Wealthtender that most workers seriously underestimate how a small fee difference compounds into a large retirement loss over time.
Many people underestimate how much fees matter over time because they look small on paper.
The damage compounds most aggressively during the final working years, when account balances are at their peak, and each fee dollar costs more.
What most 401(k) holders incorrectly assume about plan costs
About 41% of American workers are not even aware that they pay fees on their 401(k) plans, a 2026 PensionBee study found.
The confusion persists even though federal rules require plan sponsors to deliver annual fee disclosure notices to every enrolled participant.
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“The unfortunate reality is that paying higher 401(k) fees than you need to can add years onto your working life,” Capitalize noted. Fee levels vary widely depending on plan size, fund selection, and employer structure.
Teresa Hassara, who oversees workplace savings and retirement solutions as senior vice president at Principal Financial Group, told CBS News that large plans typically charge 0.3% to 0.5%, noting that small plans often exceed 1%. A participant’s fund selection also affects total costs.
3 categories of 401(k) fees every saver should know about
The Department of Labor groups retirement plan costs into three buckets, and all three can be deducted directly from your account balance.
Investment fees cover the cost of managing the underlying funds and are deducted from investment returns.
Administrative fees pay for day-to-day operational expenses such as recordkeeping, accounting, and customer service.
Individual service fees apply when a participant uses optional plan features, such as taking out a loan. “Some investment options have higher underlying investment expenses than others,” Hassara said when discussing how participants can influence their total costs.
How to find the actual fees your 401(k) plan charges
Your employer is required by federal law to send you an annual fee disclosure notice, formally known as a 404(a)(5) document.
That notice breaks out every fee category and lists the expense ratios for each investment option available in your plan.
Quarterly account statements also show fee deductions, providing a useful checkpoint between the annual disclosures you receive, Hassara explained to CBS News.
If the fees on your plan change for any reason, your employer must notify you within a 30- to 90-day window, Hassara said.
Hassara recommended that employees who have questions after reviewing those documents contact their company’s human resources department or plan recordkeeper directly.
Lower-cost fund options inside your 401(k) can reduce the drag
Morningstar‘s 2025 fund fee study found that actively managed funds carry an average expense ratio of 0.58%, while the asset-weighted average expense ratio was 0.32% in 2025, a 5.60% decline from 2024.
“Cost and level of services often go hand in hand,” Hassara cautioned, noting that higher administrative fees sometimes fund services that help employees improve returns.
Participants who want to lower their costs can start by selecting lower-priced funds within their plan’s available menu, Hassara added.
The Department of Labor recommends that plan participants pull their annual fee disclosure notice and compare each fund’s expense ratio against comparable alternatives.
That comparison is one of the most effective steps a saver can take to address excess plan costs, the Department of Labor noted in its guidance.
Related: Vanguard sends urgent warning on major 401(k) growing problem
This story was originally published by TheStreet on Jul 23, 2026, where it first appeared in the Retirement section. Add TheStreet as a Preferred Source by clicking here.
Disclaimer : This story is auto aggregated by a computer programme and has not been created or edited by DOWNTHENEWS. Publisher: finance.yahoo.com
